The Globe’s new Real Estate Beat offers news and analysis on the Canadian housing market from real estate reporter, Tara Perkins, and others. Read more on The Globe’s housing page and follow Tara on Twitter @TaraPerkins.
The parent company of Fairmont Hotels is considering doing another hotel/condo project in Canada, as it delves further into the residential business.
“I think we’ll have one to announce this year,” Greg Doman, senior vice-president of residential development at FRHI Hotels & Resorts (which owns the Fairmont, Raffles and Swissotel brands) tells me.
He won’t say where, but said it’s in a major Canadian market, not Toronto, and it would be like a mini version of the Fairmont Pacific Rim in Vancouver, a hotel with luxury condo units on top that have sold at prices that are the envy of most developers. A penthouse in the Pacific Rim made headlines recently when it sold for $25-million. It’s also the hotel where Glee actor Cory Monteith died in July.
Fairmont didn’t develop the Pacific Rim condos. It teamed up with Ian Gillespie, the well-known luxury builder who is president of Westbank Holdings Ltd. Similarly, it would team up with a developer on the new project. What Fairmont provides is support on design and construction, sales and marketing, and operations and customer benefits – as well as the brand name.
While Fairmont is spending a lot of time and resources on the condo model now, it’s been dabbling in the residential business for a decade.
Few people know that the company developed 34 four-bedroom detached homes on its own in Acapulco less than a decade ago. They weren’t sold like condos, but in fractional interests (10 owners per home). Fairmont was looking for a way to get into the residential business while staying away from the stigma of timeshares.
“Fractional is more of a second-home replacement, whereas timeshare is really an alternative to hotel use,” Mr. Doman says.
What the company found is that the people who bought into these units became ambassadors for its brand. “A lot of times they’re a chief marketing officer or chief financial officer of their company. They influence company spend, business spend, groups. They have circles of friends,” Mr. Doman says. “Great loyalty offering.”
So the Acapulco model led to the creation of the “Fairmont Heritage Place” concept, which now has a number of locations around the world.
But “fractional really got hammered” during the financial crisis, Mr. Doman says. “I think what you’re seeing now is that vacation homes are starting to come back, and fractional will come back.”
In the meantime, Fairmont branched into the “whole ownership” model (selling each residence to one owner) with the Pacific RIM project and then a couple of others in the Middle East and China.
“Now if you look at where we are, I think we have 30 projects in the pipeline, residential,” Mr. Doman says. “So we went from those two to 30, and probably at least three-quarters are urban, and a quarter are resort.”
Raffles will be opening hotels in Istanbul and Jakarta this year that each have condo residences on top. Some of these types of condos will be sold, and some might be rented out to executives.
“Whereas here [in Canada] we were maybe in a bit of catch-up mode, if you go overseas we’ve actually been at the forefront of bringing this mixed-use [hotel and residential] development to those markets,” Mr. Doman says.
Fairmont shies away from the development part of the business now, focusing on the design and operations.
Now about 60 to 65 per cent of the Raffles hotels that are in the works will have a residential component, 50 to 55 per cent of the Fairmont hotels and about 25 to 30 per cent of the Swissotels, Mr. Doman estimates.
In Canada, this new model is giving the Fairmont brand a new twist. “There’s still this association with all the historical iconic assets, and they’re great, but I think it’s also important to show what the new contemporary Fairmont is, and I think Pacific Rim does that.”Report Typo/Error
Follow us on Twitter: